An excerpt from the book
“5@55: The 5 Essential Legal Documents You Need by Age 55.“
Television shows or movies often use a deceased’s will in the plot (there have even been commercials featuring the reading of the will) so everyone is pretty much familiar with wills. And while there’s no doubt that having a will is very important, let’s face it, a will only comes into play after you’re no longer in the picture. If things don’t work out right at that point, how concerned are you going to be? But there are lots of things that can happen to you while you’re still alive and kicking (even if only barely) that can render you incapacitated or unable to act. For example, you are on a cruise, the ship’s engine catches fire and you’re stuck in the middle of the ocean for a week. It has happened. In the meantime, your son gets arrested and you want to arrange bail for him but you’re thousands of miles away stranded on a boat that’s bobbing on the deep blue sea. Or maybe you were due to sign papers to refinance your mortgage and your failure to sign will result in having to pay a higher interest rate. The only thing that might save the day in such situations is to have a duly appointed agent in a legal document called a Power of Attorney.
Some people think lawyers are too pushy when it comes to the subject of the Power of Attorney but if you heard the horror stories that lawyers encounter, from inability to access funds, having a house go into foreclosure, cars being repossessed, the inability to pay for nursing home care or home care, all because available funds were out of reach, you’d be pushy too.
Picture a wife testifying in court. The judge is asking her all sorts of personal questions. As she answers, tears are streaming down her face. Her husband is in the hospital, very ill and unable to communicate. She has two young children at home. Most of their money is in accounts that are only in her husband’s name and she needs access to their funds to pay their bills. Her husband never signed a Power of Attorney….and he was a lawyer!
And here’s another case. Sally is single, childless, 80 years-old, retired 15 years, living in her own co-op in Brooklyn. Her only relatives were two nephews who lived out of state, children of her deceased brother, Mike. They visited her several times a year and called her once every couple of months. Sally has few friends and showed signs of dementia. One day she rang her neighbor’s bell dazed and confused, possibly after suffering a stroke. The neighbor calls EMS and Sally ends of up in the hospital for four weeks. Since the hospital can’t locate any relatives or paperwork and she can’t live at home on her own, the hospital sends her to a nursing home.
Her nephews try contacting her but she doesn’t answer her phone and they have no way of finding her. Finally, after several months, they track her down at the nursing home. They immediately engage a lawyer to visit Sally at the nursing home to make a POA so they can help Aunt Sally. When the lawyer goes to see her she discovers that Sally is no longer able to understand the nature of her actions and so can’t sign any documents. The lawyer also reports back to the nephews that an institutional Guardian was just appointed by the court at the request of the nursing home which is seeking payment of its monthly charges. This Guardian, who doesn’t know Sally, is now in charge of all her affairs and will be making health care decisions for her, without the input of her family members. The nephews are devastated upon hearing this news. They can spend a lot of money going to Court to try to overturn the Guardianship, but more often than not, given that Sally never signed any papers and now isn’t physically up to it, the Courts won’t grant such a request. Because Sally did no legal planning, her co-op will be sold and its contents emptied without the opportunity to pass on her precious valuables to her loved ones. A Power of Attorney appointing a nephew or good friend could have given them the authority to make decisions for Sally.
Giving Up Control
There are many people who absolutely refuse to consider signing a POA because they are afraid of giving up control of their financial matters. They fear that doing so will allow the person they name as their agent, behind their back, to perhaps rob them or maybe just have the temerity to look at his or her financial records. The person they would make their agent is more often than not a close relative, a spouse, son or daughter, but that doesn’t seem to allay their basic fear. The idea of giving up control is just too scary. If this relative being named agent had a criminal record, this fear would certainly be justified. In fact, if all your relatives, friends and acquaintances are ex-cons than yes, maybe you shouldn’t have a POA because who could you trust as your agent? But even parents who have absolute confidence in their offspring will often come down with a serious case of “Fear of POA.”
When it comes to POAs there are too opposing forces: the possible trouble caused by not having a POA vs. the fear that a POA will be abused. So how do you navigate these tricky waters? Taking an assessment of the risks that might apply to your life is part of the answer. But before you begin that analysis, it is helpful to know a bit more about POAs.
Protections You Can Add to a POA
A POA may include restrictive language that clearly expresses your wishes and sets limits. For example, it could state that your agent must keep precise records and that these records must either be shown to you, or to someone else you designate, such as a monitor. When asking for any such records kept by your POA agent, make sure to do it in writing, and to keep a copy of the letter. If you have suspicions that your agent has been acting in an inappropriate manner, then send this letter so that you get a signed receipt, via certified mail. If you end up having to go to court to try and get back money that you feel has been misspent by your agent, having a paper trail will give more credence to your case than saying that you asked for an accounting verbally. A written request will also give you proof of exactly when you asked for this accounting so that any transactions that took place after the fact might look all the more suspicious.
In New York State you may also name more than one person to be your power of attorney representative. If you have two children, they can both be named, and you can decide whether they both need to act together or whether only one of them can sign documents like withdrawal slips and checks. If you require two persons to act together, this would serve as a check on each of the agents. (Of course having two agents could also result in conflicts between them as well as inconvenience since they must always act in unison.) Another possibility is to have the two agents act in sequence, so that one is really the primary agent but the other could still fill in.
Another option is to appoint different agents for different purposes. For example, if you are unavailable to sign documents for the sale of your house on a certain date you could appoint a limited agent for only this purpose to expire by a certain date. Then you could appoint a general long-term agent for other purposes. All these options should be discussed with your attorney.
If you’re extra cautious, you could have the POA drafted and signed but kept in your possession, or maybe kept with your lawyer. Then, if the time arose when the agent was needed, he or she could be called upon. By holding back the delivery of the POA to the agent at least you’d know that the powers you’d granted couldn’t be used until the POA document was in your agent’s hands. You would want to make sure you don’t put it somewhere so safe, like in a bank vault, that your agent couldn’t use it.
You could also choose a professional you already have a relationship with in connection with your financial matters, such as an accountant, financial adviser or lawyer to be your POA. But these individuals will likely charge you for their services, and if the job becomes time-consuming, the cost might become more than you can afford. While a family member or friend might receive some compensation, it won’t likely amount to what a professional would likely charge.
Please note, if your POA is old, or your life circumstances have changed through divorce, death or disability, it might be time to update your POA, not just because you want to change the agent or the terms, but because New York State has updated its POA forms in the last decade. While it might not mean that your old POA is invalid, it might add a layer of complication to have an outdated version of the document at the time it was needed.
What can your agent do with a POA? That’s up to you. You can give very broad powers, allowing your agent to do virtually anything you could do, or you could place limits on the agent’s authority. Let’s say you owned a second home in another state, you could give someone a POA just for the sale of that property. Other common powers include some or all banking transactions, paying bills for your care, handling legal matters, gaining entry to safe deposit boxes, dealing with retirement and insurance benefits, preparing and filing tax returns, exercising stock holder rights, taking care of Medicare planning, making gifts, changing the beneficiaries on your retirement accounts, re-titling bank accounts as joint accounts and borrowing. And a POA doesn’t have to be limited to personal finances. It can cover both finances and legal rights. If you own your own business, you might need an agent to handle those affairs, for example, sign your payroll checks if you couldn’t do it.
Most POAs become valid on the day they are signed, and all POA signatures must be witnessed by a notary public. But you could have a POA that wouldn’t become valid until either a particular day or a point in time when you were incapable of acting for yourself, as certified by a doctor. This is called a “springing” POA.
The Durable POA
A general, “durable” Power of Attorney provides the most protection. The durable POA “survives throughout your incapacity” meaning that you’ve appointed someone who will be able to take care of your affairs until you die, even if you become mentally ill or disabled. Without it, family members might have to make a court application to be appointed your Guardian. This is a time-consuming, emotionally draining and costly court process. If you don’t have close family members, it is important that you appoint a friend, colleague or professional you trust.
One noteworthy power a POA does not have is the power to make your will. That can only be done by you, and you have to be of sound mind to do so. Some people who have dementia wait too long and can no longer make a will. However, bear in mind that dementia can take a long time to render a person unable to sign legal documents. Just because a person can’t remember certain things doesn’t mean they are not legally capable of executing a POA or a will. An attorney asked to create such documents will always make sure that a person is of sufficiently sound mind to sign legal documents and the attorney can later certify as to the will maker’s mental capacity if anyone brings a challenges.
The most important decision in drafting a POA is to choose the right agent. If you have at least one person in your life that you can trust implicitly, then you won’t have any potential problems with a POA unless that person becomes unable to act. It is always best to choose a primary agent and one or two alternate agents. If everyone who comes to mind has more minuses than pluses, then you need to keep seeking out a responsible person who is willing to act for you. The vast majority of people are well served in having an agent to protect them in case of an emergency.